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two or three bidders in the race for that object. The rate of price increase is 1; that is to say, the price increases to x if x units of time has passed, where x is a real number. The price for an object stops increasing if there is at most one bidder left for the bidding race for the object, and the price will stay at that level for the rest of the game; we say the price is locked in this case. (the price for the other object will continue to increase if more than one bidder stays in the bidding race for that object). The auction ends as soon as both prices stop increasing (i.e., at most one bidder remains in the bidding race for each object). An object is sold to the bidder (if any) who remains in the bidding race for that object at the locked price. 1. What should a bidder do if his valuations for the two objects are 50 and 60, respectively? Explain your answer.

two or three bidders in the race for that object. The rate of price increase is 1; that is to say, the price increases to x if x units of time has passed, where x is a real number. The price for an object stops increasing if there is at most one bidder left for the bidding race for the object, and the price will stay at that level for the rest of the game; we say the price is locked in this case. (the price for the other object will continue to increase if more than one bidder stays in the bidding race for that object). The auction ends as soon as both prices stop increasing (i.e., at most one bidder remains in the bidding race for each object). An object is sold to the bidder (if any) who remains in the bidding race for that object at the locked price. 1. What should a bidder do if his valuations for the two objects are 50 and 60, respectively? Explain your answer.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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two or three bidders in the race for that object. The rate of price increase is 1; that is to say, the price increases to x if x units of time has passed, where x is a real number. The price for an object stops increasing if there is at most one bidder left for the bidding race for the object, and the price will stay at that level for the rest of the game; we say the price is locked in this case. (the price for the other object will continue to increase if more than one bidder stays in the bidding race for that object). The auction ends as soon as both prices stop increasing (i.e., at most one bidder remains in the bidding race for each object). An object is sold to the bidder (if any) who remains in the bidding race for that object at the locked price. 1. What should a bidder do if his valuations for the two objects are 50 and 60, respectively? Explain your answer.
Transcribed Image Text:two or three bidders in the race for that object. The rate of price increase is 1; that is to say, the price increases to x if x units of time has passed, where x is a real number. The price for an object stops increasing if there is at most one bidder left for the bidding race for the object, and the price will stay at that level for the rest of the game; we say the price is locked in this case. (the price for the other object will continue to increase if more than one bidder stays in the bidding race for that object). The auction ends as soon as both prices stop increasing (i.e., at most one bidder remains in the bidding race for each object). An object is sold to the bidder (if any) who remains in the bidding race for that object at the locked price. 1. What should a bidder do if his valuations for the two objects are 50 and 60, respectively? Explain your answer.
The Federal Communications Commission (FCC) organizes multiple auctions of airwave licenses each year that generate billions of dollars in revenue. The following is a simplified version of an FCC auction. Consider three bidders bidding for two objects (for example, an object could be a license that covers Manhattan, and a bidder can be Comcast). Let vij be bidder i's valuation for object j, where i E {1,2,3} and je {1,2}. Bidder i knows its valuation Vij but other bidders only know that vij is drawn uniformly from [0, 100]. If bidder i wins object 1 at price p1 and object 2 at price p2, bidder i's payoff is vi1 – P1 + V;2 – P2. If bidder i wins only object j at price p;, his payoff is vij – pj. If bidder i does not win any object, his payoff is 0. The auction proceeds as follows. The initial prices are zero for both objects. All bidders sit in front of their computers and observe the prices for both items in real time. Initially all bidders are invited to enter the bidding race for both items. At any moment in time, each bidder has the option to withdraw from the bidding race for either object or both. If a bidder withdraws from the bidding for one object, he can no longer get back to the bidding for that object, but he can stay in the bidding race for the other object if he hasn't withdrawn from it previously. The price for an object increase continuously over time as long as there are 'FYI. Early this year, FCC organized its 107th auction, where 57 bidders compete for 5,684 airwave licenses for 5G networks. The total revenue from auction 107 is over 80 billion dollars. FCC's auction designs have been adopted by many other countries in the world, and the auctions rules have been updated from time to time. Microeconomic theorists are involved in both auction designs and actual bidding.
Transcribed Image Text:The Federal Communications Commission (FCC) organizes multiple auctions of airwave licenses each year that generate billions of dollars in revenue. The following is a simplified version of an FCC auction. Consider three bidders bidding for two objects (for example, an object could be a license that covers Manhattan, and a bidder can be Comcast). Let vij be bidder i's valuation for object j, where i E {1,2,3} and je {1,2}. Bidder i knows its valuation Vij but other bidders only know that vij is drawn uniformly from [0, 100]. If bidder i wins object 1 at price p1 and object 2 at price p2, bidder i's payoff is vi1 – P1 + V;2 – P2. If bidder i wins only object j at price p;, his payoff is vij – pj. If bidder i does not win any object, his payoff is 0. The auction proceeds as follows. The initial prices are zero for both objects. All bidders sit in front of their computers and observe the prices for both items in real time. Initially all bidders are invited to enter the bidding race for both items. At any moment in time, each bidder has the option to withdraw from the bidding race for either object or both. If a bidder withdraws from the bidding for one object, he can no longer get back to the bidding for that object, but he can stay in the bidding race for the other object if he hasn't withdrawn from it previously. The price for an object increase continuously over time as long as there are 'FYI. Early this year, FCC organized its 107th auction, where 57 bidders compete for 5,684 airwave licenses for 5G networks. The total revenue from auction 107 is over 80 billion dollars. FCC's auction designs have been adopted by many other countries in the world, and the auctions rules have been updated from time to time. Microeconomic theorists are involved in both auction designs and actual bidding.
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